Uganda refocuses on metre gauge rail as Kenya delays SGR

Saturday January 6 2018

In Summary

Kampala scales back its ambitions to the metre gauge rail after Nairobi's failure to get money for building a standard line to the border.

But Uganda faces another hurdle back home; the metre railway is currently operated by RVR, whose concession had been terminated.

Experts told The EastAfrican that even if finances for the Kisumu-Malaba and Malaba-Kampala are availed immediately, it would take another three years to get the project over the line from commencement of construction.

Uganda plans to refocus its efforts on revamping its metre gauge railway in the medium term as Kenya’s delay in raising financing for the Kisumu-Malaba leg of its standard gauge railway will cause Uganda to defer its plans for at least three years.

The EastAfrican has learnt that although the two countries have already agreed to synchronise their projects, the process is still riddled with challenges that will hold back building the $2.3 billion standard gauge railway from Malaba to Kampala.

“We still have issues to sort out during 2018. I cannot answer when we will get financial closure for Malaba-Kampala. We need to first agree with Kenya on how quickly they can get financial closure for Kisumu-Malaba,” said Keith Muhakanizi, the Secretary to the Treasury and Permanent Secretary in the Ministry of Finance.

Mr Muhakanizi could not give details of how much money government intends to use to revamp the existing railway, currently operating by Rift Valley Railways, but he insisted that the 2018/19 budget will provide funds for this purpose.

“We are putting money in the budget for this. We have to do something about railways,” he added.

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Experts told The EastAfrican that even if finances for the Kisumu-Malaba and Malaba-Kampala are availed immediately, it would take another three years to get the project over the line from commencement of construction.

No feasibility studies

It is understood that a meeting that was to be held in Beijing in October to discuss the final funding proposal failed to materialise.

“The ministers for transport and finance of the two countries were supposed to have engagements with China Exim Bank on the sections of Kisumu to Kampala via Malaba, but this flopped and instead the executives from China Exim Bank flew in to Kampala and Nairobi last November to carry out due diligence on the Uganda project proposal and contract application. Kampala was challenged to meet some financial conditions, which they said they would do before March this year,” The EastAfrican was told.

Kisumu-Malaba is at the tail end of Kenya’s SGR project, whose first phase from Mombasa to Nairobi was completed last year. The second phase stretches from Nairobi to Malaba, with three sub phases — Nairobi-Naivasha, Naivasha-Kisumu and Kisumu-Malaba.

With the $1.5 billion funding for Nairobi-Naivasha secured, the Kenya government is about to submit the financial proposal to the Exim Bank of China for the Naivasha-Kisumu leg, leaving the onward route to Malaba with no feasibility studies and still a long way from financial closure.

Kenya Railways managing director Atanas Maina said that Kenya was yet to submit its funding proposal for the last connection between Malaba and Kisumu as they felt they needed to finish the third phase (Naivasha-Kisumu) first.

“We had engagements with Uganda over this last phase in September. However, we are yet to submit the funding request for Section 2C because we felt we needed to finish up Section 2B before moving on to the last section. We are at the stage of discussion of 2B as we have already submitted the application proposal for its funding,” Mr Maina said.

Sources familiar with the project reveal that completion of feasibility studies, submission of financial proposals and approval for funding could take two to three years, further pushing back the construction timelines for Uganda’s SGR.

“The process depends on Kenya’s readiness for Kisumu-Malaba. I cannot see construction of Malaba-Kampala starting before 2020,” the source said, adding that the option for Uganda in the medium term is to go big on the metre gauge railway.

RVR handover?

But Uganda faces another hurdle back home; the railway is currently operated by RVR, whose concession had been terminated. However, last October the company rushed to court for arbitration and successfully halted the process.

However, sources told The EastAfrican that RVR has managed insignificant operations since halting the termination. The sources added that there is little confidence that the troubled concessionaire can turn around the business, which is heavily indebted.

Last week, there were negotiations between the Attorney General, the Ministry of Works and Uganda Railways Corporation (URC) to get RVR to hand over its assets and rail operations to the government.

URC managing director Charles Kateba said that once the underperforming RVR is out of the picture, government will in 2018 embark on revamping metre gauge routes like Tororo-Gulu and Port Bell-Kampala to increase operations for the foreseeable future and lessen the gap that was meant to be filled by the SGR.

'Not in good shape'

The 273km Malaba-Kampala section of Uganda’s SGR, which terminates at Bukasa Port near Port Bell, is part of the Northern Corridor Infrastructure Projects; the other sections in Uganda will link it with South Sudan at Nimule border post, the Democratic Republic of Congo at two border posts of Vurra in northern Uganda, and Mpondwe in the south west.

The Ugandan SGR is a $12.8 billion project that will cover 1,724km. President Yoweri Museveni last month held a meeting with his Kenyan counterpart Uhuru Kenyatta on the seamless connectivity of the two countries’ multibillion projects.

President Uhuru Kenyatta (right) welcomes his Ugandan counterpart Yoweri Museveni at State House on December 19, 2017. The two heads of state discussed bilateral and regional issues. PHOTO | SAMUEL MIRING'U | PSCU

With government seemingly in favour of the SGR project over the dilapidated metre gauge railway, it also emerges that top officials and state agencies are fighting over the implementation of Uganda’s SGR, and that there are attempts to move it away from its current Secretariat and hand it to URC.

A report by the Parliament’s Committee of Physical Infrastructure said that “the project implementation is not in good shape” and several missed timelines reflect badly on the project implementation unit, which is accused of feeding wrong advice and peddling falsehoods on the specifications and class of SGR Uganda is building, as well as inflated unit costs.

The committee presented a report early last year, based on their visit to Ethiopia, where the law makers engaged with the country’s SGR that was commissioned in 2016 in order to guide Uganda’s project.

“The committee notes that to all intents and purposes, Uganda’s proposed SGR has the same specifications as regards design and operating speeds and is expected to serve the same purpose as the Ethiopia and Kenya networks,” the report said, adding that Ethiopia paid $5 million per kilometre of track, implying that at $8.42 million per kilometre, Kampala is paying over the odds.

State Minister for Works Gen Katumba Wamala denied this, saying that the project management unit was doing its work. He added that URC currently “has issues with the RVR concession that still need to be sorted” and that “it doesn’t make sense to put SGR under URC.”

“That is a rumour. Whether the running of SGR will be under URC will be determined. We haven’t reached that bridge yet,” he said.